The cost of energy: a comparison of fuels in Ontario

Aside from food, most people use three types of energy. First and foremost is electricity: it is the most versatile and therefore generally the most valuable. It powers homes, office buildings, subways and much more. Second, petroleum—mostly in the form of gasoline, with considerable amounts of diesel. We use petroleum mostly for transportation. And third, natural gas for heating and cooling. What does a kilowatt-hour of each type of energy cost?

The kilowatt-hour (kWh) is almost always associated with electricity. But it is really just a unit of energy, which can be applied to all fuels, not just electricity.

The kilowatt-hour (kWh) is almost always associated with electricity. But it is really just a unit of energy, which can be applied to all fuels, not just electricity.

Good question, and the answer varies depending on the fuel and where you get it. I’ll use my hometown of Ottawa Ontario as an example.

Electricity. The price of a kilowatt-hour of electricity in Ottawa is, according to my most recent bill, 18.95 cents. I got that figure by dividing my total amount owing, $60.87 (including tax), by the number of kWhs the bill says I used, 321.19.

The price of a kWh of electricity in eastern Muskoka, where my cottage is, is 29.5 cents per kWh (based on 945 kWh used over three months last summer; total owing was $279.49). Yes—same product, from the same electricity grid and same generation sources, but it costs 55 percent more in eastern Muskoka—poortown Ontario—than it does in relatively affluent Ottawa. I will take that issue up in a minute.

Gasoline. I just put 42.5 litres of gasoline into my car at the Shell on the west side of Merivale half a kilometer south of Baseline, and it cost 93.9 cents per litre. A litre of gasoline contains roughly 8.9 kilowatt-hours of energy, so you could say that each kWh of gasoline energy cost me roughly 10.5 cents. Six months ago, I was paying $1.30 per litre—14.6 cents. (To determine the cost of a kWh of gasoline energy, divide the per-litre price by 8.9 kWh.)

Natural gas (a.k.a methane). In Canada, natural gas is sold at the retail level by the cubic meter. A cubic meter of natural gas contains roughly 10 kWh of energy. According to an Enbridge bill covering November 2014, an Ottawa residential customer who had used 246 m3 was billed $94.04 all-in including tax. That works out to 3.8 cents per kWh (2246 kWh divided by $94.04.)

Here is a chart that lays this out:

And here is is the data on which the chart is based:

Enbridge Hydro Ottawa Hydro One Shell
m3 or litres 246 1
kWh 2460 321.19 945.86 8.9
All-in price $94.04 $60.87 $279.49 $0.94
$/kWh $0.038 $0.190 $0.295 $0.106
¢/kWh 3.82 18.95 29.54 10.55
CIPK, grams 187.9 42 42 258.42

What jumps out? Immediately, you see that the cheapest fuels, natural gas and gasoline, are also the dirtiest. Natural gas costs 3.82 cents per kWh and its CIPK is 187.9 grams; gasoline costs 10.5 cents per kWh and its CIPK is 258.4 grams. Electricity, nearly four times cleaner than natural gas, cost nearly five times as much as natural gas in Ottawa, and nearly 8 times as much in eastern Muskoka.

I know a guy in eastern Muskoka who has gone completely off the electricity grid. This is not because he is some sort of anti-grid “sustainability” fanatic. Nor is he a “FIT-trepreneur”—a wind/solar proponent who fancies himself a fearless entrepreneur but in reality is paid by the government, with money taken from the pool of electricity customers in Ontario, to install wind turbines or solar panels on his property, and whose profit is guaranteed through artificially high electricity rates, paid by the same customers. FIT-trepreneurs are not off-grid—the whole scheme depends on them being on-grid.

No, this fellow has gone off the grid because he simply can no longer afford the extremely high cost of electrical energy in that part of the province—nearly 30 cents per kWh, as you can see in the table above. He now lights his place with electricity from solar panels, and heats and cooks with wood. He has to be positively miserly with the amount of electric light he uses: solar energy, as I have explained in previous posts, is about the least efficient way to make electricity. So his solar panels don’t provide much energy.

And what is the cost of a kWh of energy from wood combustion? It depends on how you value the labour of the person who fells, transports, saws, and splits the wood. I have personally done all four of these activities, and I can tell you from personal experience that they can be fun to do when you are being a man in the great outdoors. But that cachet wears off after a couple of days—to get all your heat from wood that you fell, transport, saw, and split yourself, well that is a lot of work. And though the market does not pay all that much for firewood, I value my own labour quite highly. It is my body and my time. I am sure my Muskoka neighbour feels the same way about his own labour. But he has to contend with the market, and that market has priced him out of electric power from the grid.

And to add insult to injury, the Ontario electricity “market” is a market in name only. Prices in Ontario electricity are fixed, by the government. And the government has been persuaded by environmentalists to slap high prices on electricity. Ontario electricity used to be priced on a power-at-cost basis, which meant essentially that urban rate payers paid slightly above cost, and rural customers paid at cost. This was because urban customers are more plentiful and relatively more affluent; rural customers are scarce and relatively poor. So urbanites could afford to pay slightly above cost, in order to have the rural parts of the province electrified.

But the power-at-cost ethos has been turned on its head. Today, rural customers pay rates far above what urbanites pay. And because urbanites themselves are forced pay far-above-market rates to guarantee the profits of private-sector wind and solar “entrepreneurs,” the general price of electricity is high all over the province.

Hence the high prices for electrical energy shown in the table above, relative to the prices for heat and transportation energy.

The kicker is, electricity used to be cheap. It was almost always much cleaner, kilowatt-hour for kilowatt-hour, than natural gas and gasoline.

But we have now deliberately made it more expensive. So, those who can choose their fuels, do so. And they choose natural gas, which though nearly five times as carbon-intensive as electricity, costs one-fifth what electricity does.

And those for whom gas is not available… well, they choose wood. The dirtiest fuel of them all.

32 comments for “The cost of energy: a comparison of fuels in Ontario

  1. Bob
    February 10, 2015 at 01:07

    1 Nat Gas is a dirty fuel? CO2, a life giving gas supporting all life on earth is a pollutant? Jeesh. Well, ok we make nat gas dirty when we ‘convert’ it into tar sand oil but otherwise, please, nat gas is a clean fuel we can all burn in our furnaces and still (unlike coal) have breathable cities.
    2 Interesting hourly tables. Would it be possible to include a table to show prices obtained by nighttime wind energy, the stuff that gets dumped in US markets?

    • February 10, 2015 at 08:38

      compared with coal yes it could be called (relatively) “clean.” But I’m comparing it with nuclear, which emits zero CO2. Nuclear is by far the main reason why Ontario electricity CIPK was 47.85 grams last year. The 47.85 grams were mostly from gas-fired plants, which made nine (9) percent of Ontario’s electricity. Nuclear made 61 percent.

      On price of nighttime wind energy — great minds think alike. Yes it would be possible to include prices, have been working on it and it should be ready soon.

      • Stephen Hood
        February 24, 2015 at 12:04

        Steve, I usually value your commentary and perspective on energy issues. Like you I favour more nuclear generation, lower GHG emission, and energy efficiency in general. But in labelling NG a dirty fuel you are doing yourself a disservice, seemingly moving to an extreme pro-nuclear opinion, and ignoring the roles of different energy forms in lowering our GHG footprint both transitionally and long term. All-nuclear is not ever going to happen and I think you know that. So why push the extreme view?

        In my humble opinion we need to reduce our current GHG footprint by about 90% if we are to stop AGW. There is definitely a role for nuclear energy but being a non-renewable fuel it must eventually fade away just like fossil fuels.

        Natural Gas although worse than nuclear is much better than coal, oil and tar sands oil – making it another transitional fuel – to eventually fade away too.

        The renewables is where we must be careful – backing the truly viable future technologies of which I don’t think there are any right now. eg biomass is a farce, so is solar PV, wind maybe but will always be a small contributor.

        Conservation – that is where the real heavy lifting needs to be done. Current conservation efforts by the OPA, and other utilities amount to little more than greenwashing.

        Ok, you’re a smart guy and you already know all of this, sorry for taking up server space but here is my point – nuclear is not the answer. It’s part of the answer for the short to medium term. Many fuels and technologies have roles to play both transitionally and long term. Some like natural gas are better than others and have a role to play as well. Real conservation hasn’t even started yet, that’s when you have to as opposed to wanting to, or worse wanting to appear to. I’m not sure what we’re waiting for on the conservation push, because it’s the only present day approach which is truly sustainable.

        Hey ranting is fun, I see how you must enjoy writing your articles.
        Have a great day.

        Steve Hood

        • February 24, 2015 at 13:24

          Steve, no problem — premium server space is reserved for comments, even when commenters find issue with my pro-nukery.

          Gas-better-than-coal — no it’s actually not. Every single mole of methane tapped winds up in the atmosphere either raw or as CO2. You run a gas pipeline and that pipeline transports gas, all of which will enter the atmosphere as a GHG.

          Plus, it is not an alternative but an input to tar sands production — in fact, gas, as both feedstock and energy source for hydrogen production, is the Number One reason for the high lifecycle GHGs of tar sands crude. You gotta put hydrogen into those heavy hydrocarbon molecules to make them less viscous.

          Besides, the choice in Ontario is no longer gas versus coal. Gas won that war, and nuclear should have won it. We could at this very moment have at least 3,000 more MW coming from nuke plants instead of the gas plants which are dumping a thousand tons of CO2 into our air every hour.

          As for conservation — it’s minus fifteen outside. What conservation is going to keep my office at +21 instead of -15? My whole point in this article is that “conservation” measures in the form of extreme electricity prices encouraged not energy conservation but fuel shifting. To dirtier fuels.

          • Maury Markowitz
            February 25, 2015 at 16:07

            “Gas won that war, and nuclear should have won it.”

            Here’s the latest numbers:

            http://www.lazard.com/PDF/Levelized%20Cost%20of%20Energy%20-%20Version%208.0.pdf

            CAPEX on nuclear is averaging $7.50/W.

            CAPEX on gas plants is about $1.25/W.

            LCOE on new gas is about 6 cents. For new nuclear it’s around 10 cents.

            That’s why gas won. And should have.

          • February 26, 2015 at 19:06

            Add the externalities of gas and what happens to its cost.

            Gas plants dumped 35,000 tons of climate-destabilizing, ocean-acidifying CO2 into our air in the 18 hours since midnight February 26, in the course of making less than one-fifth of Ontario’s electricity.

            No, it shouldn’t have won.

          • John
            April 19, 2017 at 16:31

            Similar to my comment left below. The effiency of natural gas piston generators is about the same as that of a coal fired generation station (33%) (happy coincidence). However the a natural gas turbine in a proper power plant is approx 60% efficient, so the input carbon load for a natural gas turbine generator is approx half to produce the same kwh as a coal fired plant.

            A comment on the Candu Nuclear reactors. I was fortunate to study the design of those reactors with one of the engineers who developed them. They are by far the best nuclear technology in the world and by far the safest. They do not operate using the graphite moderator rods that the US, Russian and French reactors do. However, I had the fortune or the missfortune to attend a information session where the Canadian Atomic Energy Commision was laying out the plan to deal with the spent fuel bundles in public consulation to the cities that would be on the transportation route. That hearing was loaded with an audience of people who did not understand the technology, did not want to understand it and were full of blatant lies and willing to spread them. I dont believe that Canada has any taste for building more nuclear reactors and our government is terrible at explaining how our technology is safe, especially compared to the reactor programs that are used to make tactical nukes. People live in ignorance and fear about the topic and that rules the day.

      • Wayne
        October 28, 2017 at 17:02

        Carbon dioxide is a clean, odorless and colorless gas which is the gas of life because it drives photosynthesis. And without plants, we could not survive. And with atmospheric concentrations at about 400 ppm, CO2 is low compared to the geological past where concentrations ranged up to thousands of ppm. And on top of that, although CO2 is a greenhouse gas its contribution to global warming (or now cooling since 1998) is not detectable; the CO2 signal is lost within the background noise. To be more blunt, and speaking as a research scientist in the area of climate change, the AGW theory of global warming is perhaps the greatest scientific fraud of the 20th century.

        • November 15, 2017 at 12:55

          I know CO2 is colorless, ordourless, and that as a participant in photosynthesis it is essential for plants to feed both themselves and the fungi that feed them. And I know that at ~400 ppm it is low compared with the geologic past.

          As for its contribution not being discernible from background, well most climate scientists say it is discernible, and have published lots of what they consider to be proof.

          You disagree with them, which is fine, but have you published this disagreement in a journal? If you’re provably right and everyone else is wrong, that’s a Nobel Prize right there.

    • Paul Smith
      November 14, 2017 at 18:12

      Natural gas emits half the CO2 of coal. It is by no means clean. Water is life giving too, unless you’re drowning, and we are drowning in CO2.
      As far as wind power being dumped, all sources get dumped when the demand drops.

  2. February 11, 2015 at 01:28

    It looks like the “green” taxes on electricity are so high, they make gasoline competitive with EVs on straight energy cost (conversion losses included).

    This is such a miserable policy (from whom? I can’t even keep the Canadian parties straight) that I have to wonder if a conservative party could win by promising an “unreliability tax” or something else to recoup all the green subsidies and return them to ratepayers.  Yes, the current operators of wind and PV farms would go broke; the new owners would have to make money by selling at a price that recouped their costs, and having to eat the construction loans would keep anyone from lending money for such follies ever again.

    • Maury Markowitz
      February 25, 2015 at 16:09

      “to recoup all the green subsidies and return them to ratepayers”

      Now *that* is a good idea.

      They should do this immediately after handing back the $50 billion they dumped into AECL.

      • February 26, 2015 at 19:01

        Make up your mind over whether costly electricity is good or bad.

        And get your facts right about the amounts that paid for the reactor that produces isotopes that are used in millions of diagnostic and therapeutic applications every year. I bet friends and relatives of those Canadian recipients of these applications, i.e., the beneficiaries of publicly funded health care, are glad that that money was “dumped” into AECL.

  3. R Budd
    February 16, 2015 at 09:02

    Whats happening in Ontario is a testament to how effective an aggressive feed-in tarrif can be at driving uptake of so called renewable technologies.
    If you can force enough extra costs and untimely generation onto a grid you can make it quite disfunctional and expensive. Then the same R.E. technology that added to the increased cost of grid electricty becomes an attractive option for ratepayers.
    They then opt out or net meter to protect themselves and the whole utility system starts to break down, again driving even more R.E. uptake. It’s a ponzie with the environment bearing the real cost.
    Same thing in Germany except Ontario is doing a much better job of kicking itself in the crotch, as the utilities that are being devalued here are public assets, not largely out of country ones as in Germany.
    Also Germany at least increases value in it’s domestic fossil coal and diverts cash flow back to their own country. In Ontario we shift our cash flow from domestic generation to off-shore wind/solar corporations and out of province natural gas resources.
    It’s either stupid or criminal here, but the Liberals will get away with it by saying they are democratizing or greening the grid.

  4. cyrus
    December 31, 2015 at 23:53

    everyone knows nuclear will be poisoning the planet long after we wipe ourselves out and take most of the other species with us.
    millions of years from now whatever has evolved after we are gone is gonna have to deal with unatural concentrations of radiation.
    irresponsible to infinity and beyond.

    • January 1, 2016 at 19:24

      I guess it’s good you commented anonymously, because … that is some serious ignorance you have just displayed. Thanks for dropping by though.

    • January 2, 2016 at 12:13

      Just like the “accidental reactor” at Oklo in Gabon wiped out life on earth.

      Just like all the thorium in the monazite sand beaches of Kerala and Guarapari has killed off everything that lived there and left them empty and barren.

      Wait a minute, you mean it didn’t?  Oklo did nothing?  Kerala and Guarapari are health retreats?!

      Never mind, then.

  5. Russell
    April 1, 2016 at 19:08

    So who wants to purchase an electric car at these rates? No one should support this mentality that deters carbon reduction. Oh, just a minute, the government has a solution…., Carbon tax, lets shaft it to those that foolishly thought that electricity is over priced compared to other sources. We will drive all energy levels up to the point that energy will trump food or other necessity costs. But who cares, its just money, money that you worked for, but didn’t have the appreciation for it’s real value in the hands of government.
    By the way, when employers shut down their operations when costs exceed their ability to profit, no jobs, no money, the only alternative will be to leave this place. Hopefully to a more temperate area where energy is least needed. Winters coming!

  6. Paul Koktan
    July 10, 2016 at 10:55

    Nuclear plants have never been built or refurbished on time or on budget. While operating costs aren’t bad capital costs for building/refurbishing/decomissioning are horrendous. AND the cost of storing the waste goes on FOREVER! If renewables are so bad why are so many countries like Norway, Spain & Germany to name a few doing so well. While they have reliability issues, the holy grail is going to be cost effective energy storage which may be coming. I am loving the electric car I bought for my business. Any new technology needs kickstart funding. Ultimately electrics will be competitive cost wise the “ice” cars and not need subsidies. Back on the nuclear track when governments want to privatize they can’t GIVE AWAY a nuke!

    • July 10, 2016 at 11:21

      If renewables are so bad why are so many countries like Norway, Spain & Germany to name a few doing so well.

      Because they aren’t doing so well. In fact they are going backwards. See
      http://canadianenergyissues.com/2014/01/27/two-carbon-reduction-paths-diverged-in-the-european-policy-wood-great-britain-takes-less-traveled-more-interesting-one/

      AND the cost of storing the waste goes on FOREVER!

      Let me guess. You googled “nuclear waste,” clicked on the first wikipedia article that popped up, and cut and pasted?

      Carbon dioxide produced today by the fossil plants that are backing up Germany’s precious windmills will still be swirling in the global atmosphere many many thousands of years after the fission products in used nuclear fuel have decayed into stable elements.

      • July 18, 2016 at 14:21

        442 nuclear power plants operating worldwide. 3 significant failures to date. Those are some ugly odds…If we're going to keep playing this game, it's time for a radical increase in engineered fa–arstofcsofety, given the calamitous scale of errors/unaccounted for scenarios.

        • Andy English
          September 18, 2016 at 10:34

          Nuclear Power is the safest, cleanest, most environmentally friendly way to produce electricity. It has the lowest number of deaths rate per TWH at 0.04, hydro is next at 0.1; coal leads the pack. Nuclear has been producing electricity for more than sixty years, about half as long as we have had centralized power plants. In that sixty years about sixty deaths can be attributed to nuclear.
          https://www.equities.com/news/how-i-learned-to-stop-worrying-and-love-nuclear-power

  7. August 14, 2016 at 00:56

    Why is a thorium reactor not bring pushed to the forefront? According to Mr. Gates this would help solve our problems. Not near the radiation problems. Can’t make bombs from it ..win win. If NG is so much cheaper, why aren’t homeowners putting in NG generators for their electric needs. Seems to me like a cost effective fix, only one utility bill besides sewer and water, sounds good to me. Your thoughts?

    • August 14, 2016 at 16:35

      I wish Bill Gates well in his effort to promote the TWR. I wish the thorium advocates well also.

      Their claims of better proliferation resistance and rad protection clang a bit with me though. Nobody has ever proliferated based on a commercial power reactor. All proliferants have used as their springboard a secret military program, based on uranium isotope separation. Ironically for its talk of proliferation-resistance, the TWR uses depleted uranium, a product of isotope separation. Iran got a lot of attention when people found out it was separating uranium isotopes. I am not saying the TWR is a proliferation threat (it’s not), just that two can play that game.

      Radiation from power reactors is an issue only in the minds of anti-nuclear fearmongers and anybody foolish enough to take them seriously. It certainly has no effect on the people who spend their professional careers in close proximity to operating reactors.

      I could easily see homeowners thinking about putting in their own gas-fired generators in order to benefit from low gas prices, BUT — they would have to go off-grid and that would be problematic for all sorts of reasons.

      They main issue would be cost, the next issue would be safety. In the end, it’s always less expensive and far far less bothersome to just use the grid, even with high prices like Ontario experiences today.

  8. Ted S
    September 17, 2016 at 10:59

    After a hydro bill this summer of $500 per month for a 1500 square foot home… we are looking for natural gas or diesel generator systems.

    At this point its less expensive to generate power yourself than to buy it from the utility.

    I would rather even pay more using self generation just to know its not going to this bloated bureaucracy laden government and hydro system.

    Nothing is going to change in ontario unless we get drastic change. The PC party can go hard right and still get elected. Hopefully they know it.

  9. Jacob
    January 11, 2017 at 23:33

    Nuclear and renewable can’t be out only source currently until we have a good energy storage solution. Nuclear cannot be easily ramped up and down to meet energy demands and wind/solar is unpredictable. Sure we could probably go a little heavier on Nuclear.
    Also your energy numbers do they factor in efficiencies transferring to electricity or just all pure energy numbers?
    Thanks

    • January 16, 2017 at 10:42

      Good question — no, CIPK here in the case of gasoline and natgas is based on the energy and carbon content of the fuel, and does not factor in power conversion efficiency. With electricity it does factor in conversion efficiency. So electricity CIPK is based on total CO2 emissions from the combustible fuel generators in 2014 divided by total (net, grid) generation in 2014.

      I decided to go with CIPK at the purchase point.

  10. Rick Duval
    January 29, 2017 at 09:12

    Excellent article and comments as well. Thank you for taking the time to put it together. If only we can find a way to reduce the $661 a month bill to heat my little condo (forced air electric) to half or less I’d be a happy man. If natural gas was available here I’d switch in a heartbeat.

  11. John
    April 19, 2017 at 16:13

    Your conversion of kwh of gasoline and natural gas to usable energy does not take into account the efficiency of the fuel converstion to usable enery. For instance the efficency of the combustion engine (approx 33% for easy math). To get the same power yeild from fuel to the tire on the road you would need to consume 3X as much gasoline as you would electricity (Electric motor 99+%). So gasoline at 8 c/kwh * 3 = 24 c/kwh. Which makes sense, the cost to drive 100km in a gasoline car is more generally expensive than that of a Tesla.
    Similarly converting natural gas into electricity using a common pistion style generator has the same conversion from fuel to electricity of approx 3X.
    Using natural gas in a mid efficency furnace for heating (approx 66% eff) multiply by 3/2.
    To compare apples to apples it is directly applicable to compare the fuel required with the equivilent end state “work completed”.

  12. September 16, 2017 at 06:41

    There’s no doubt that electricity uses up some of the Earth’s natural resources. However, some energy companies in Texas are more eco-friendly than others, using different sources of power and dispersing different amounts of emissions into the environment.

  13. Rick
    November 14, 2017 at 13:01

    Where can i buy a natural gas heating system that also generates electricity on demand in Ontario or Canada for that matter ?

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